I was wondering why so many people appear desperate to get Jeremy Hunt to change ISA rules so that more money can flow from UK savers in the London Stock Exchange.
A quick bit of research led me to this chart on Statista:
Market capitalization of companies trading on the London Stock Exchange (LSE) from January 2015 to July 2023
Of course there are variations with time - and Covid - but it hardly takes a genius to note that the underlying trend of market capitalisation of companies quoted on the London Stock Exchange is markedly downward.
No one thinks changing ISA rules to encourage saving in the shares of UK companies will deliver a penny more in terms of investment in the UK economy. But, changing these rules might lead to some more money heading for the City in the UK, for them to speculate with, squander and exploit. And that is what this proposal is all about.
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ISAs is a small part of the City’s business. I think the push is mainly from savers.
The decline in Stock Market Cap is indicative of more serious problems!
£460bn now
Well over 10% of the FTSE
The volume of trade is vital to the London Stock Exchange. This year it has fallen by a third. Inevitable there will be knock on effect to the rest of the City financial the supporting professions such as law. Might this be a problem for an economy (and tax income) is heavily dependent upon the strength and profitability of the financial services sector concentrated in London and the South East?
https://uk.movies.yahoo.com/london-stock-exchange-daily-trading-153714902.html
Can this have any connection to the UK government taking away the money from Russian investors in 2021 consequently showing all others that the City is no longer a safe haven for dodgy money?
Hard to know
But more likely Brexit by far, reducing the attraction of London
Thank you, both.
I work in the City and have done since the mid-1990s, including from 2007 – 16 on regulatory and trade policy.
The City’s reliance on Russia is overstated and often for political reasons.
Post crisis regulatory reform, which did not go far enough in my view and were a missed opportunity, Brexit, the retreat from empire, the decline of the UK and the development of new / alternative financial services centres are much more responsible.
Thanks
I am naive on these things, but aren’t there two things going on? The market capitalisation (your graph) is about an assessment of the value of companies – which is adversely affected by the poor future prospects for companies based in the UK, due largely to the perceived competence (not) of our government and the lack of strategic planning needed to justify business investment. The big money in the markets is not from ISAs, and that is what sets those pricing assessments.
But secondly Rod’s point is probably right, the marginalisation of the UK (London) as a financial centre due to Brexit has led to a lower volume of trading, and that is further undermining the global credibility of the London Stock Exchange. Encouraging small investors via ISAs looks like a somewhat desparate ruse to increase the number of trades.
The idea will only ever be a token help. Companies need a stable environment to invest in growth – and it is the promise of future earnings and their growth that is (or should be) reflected in share prices – and that comes from a competent government creating the environment by investing longterm in the things that companies need but are outside their control. So not so much government giveaways, more the confidence that (say) investment in abundant renewable energy sources will make electric arc steel furnaces (or even green hydrogen powered ones) viable.
There is also the composition of the U.K. market. It is long on on tobacco, beverages, financial services and especially minerals. They are unattractive markets. Of course London is declining.
Thank you and well said, Richard.
It’s worth comparing London and Paris, which the French media often does.
Big money laundering case brewing in Jersey for you to look into Richard.
Trust Company called Fiduchi Limited. Google Fiduchi Limited under Google news and you will come across a number of articles on Su Haijin as they set up a company for him.
Like this one – https://www.weeklyblitz.net/featured/singaporean-money-launderers-buy-properties-in-london/
Read this recently from a fund manager’s perspective:
https://citywire.com/investment-trust-insider/news/the-uk-stock-market-is-dying-and-wealth-firms-are-partly-responsible/a2430540
Quite detailed and multifaceted (and just one opinion) but my reading is that it seems to suggest that demand is weak (ie low funds available to invest in stocks); share prices are weak (aha! opportunity for ‘value investors’?!); and companies are tending to list elsewhere, IPO elsewhere…
One cause being large fund managers tilting away from London and being globalised.
As Richard says, enticing more money into ISAs won’t necessarily improve the FTSE or any other London market, unless savers no longer buy generic funds but select shares directly. It’ll just boost funds and their fees; and increase the volatility of the value of individuals’ savings. Even the British ISA idea can’t really address the issue, or produce real UK investment, if there aren’t IPOs or other issuance in London for firms doing real business in the UK. A lot of the big London listings are global corporations (often the big bad ones like oil and gas and mining) with real operations overseas.